More O&G big ticket jobs in 2013

KUCHING: Oil and gas (O&G) sector will see 2013 to be a year packed with awards of contracts, new field discoveries, and possibly more mergers and acquisitions (M&A) to expand and strengthen income streams.

MIDF Amanah Investment Bank Bhd (MIDF Research) in its wildcard report expected a good mix of local, regional and international jobs to be awarded and Petroliam Nasional Bhd (Petronas) would keep the momentum going as it pushed for more deepwater, high pressure, high temperature and high carbon dioxide fields.

However, it added that there was urgency for Malaysia to increase its proven oil reserves to match the increasing oil consumption, which would keep and sustain the vibrancy of the sector.

Local oil production was expected to outpace oil consumption in 2013 mainly due to the shift in focus in power generation mix, from oil and distillates to coal.

For the year 2012, more than RM10 billion worth of contracts were awarded to local listed O&G players. For the month of December itself, about RM143 million worth of new jobs had been awarded.

“2012 has indeed ended on a positive note. During the year, there were numerous big tickets jobs dished out namely the provision of a floating production storage and offloading vessel for North Malay Basin worth RM843 million, offshore facilities maintenance works worth RM700 million and extended jobs for offshore facilities worth RM1.3 billion,” MIDF Research stated.

“In addition to that, the North Malay Basin which has seen a commitment of RM16.4 billion from Petronas and Hass is likely to see some awards being dished out.”

As at end of December 2012, there were in total 699 competitive rigs globally of which 590 were fully utilised. On average, utilisation rates increased in month of December from 79.3 per cent to 81.4 per cent by month end.

UPSIDE RISK: There is an urgency for Malaysia to increase its proven oil reserves to match the increasing oil consumption, which will keep and sustain the vibrancy of the sector.

“This positive trend has been supporting our view that the second half of 2012 will see a pickup in O&G exploration and services activity, which is supported by sustained oil prices,” said the research firm.

Pick-ups in activities were seen in Asia, the North Sea, the Gulf of Mexico and North America.

“We opine that for 2013, oil prices will be supported by a few  key factors which pose upside risks, One of the factor is global gross domestic product (GDP) growth, driven by Asia,” it pointed out.

Moving forward, Asia Pacific was expected to lead oil consumption growth at 29.8 million barrels per day (mbpd) in 2013 compared with 29.4mbpd the year before, while consumption in Europe was expected to decline and the US remained flattish.

As for shale oil, this would not pose as a significant upside risks to oil prices as the breakeven production prices at the Bakken formation was between US$80 and US$90 per barrel, compared with the Middle East oil production of less than US$10 per barrel.

Taking into consideration the current outlook for O&G, MIDF Research’s West Texas Intermediate (WTI) oil price projection for 2013 was maintained at US$96.5 per barrel on the back of world GDP forecast of between 3.8 per cent and 4.1 per cent for 2013.

Bloomberg consensus had this month, reduced its 2013 WTI forecast from US$100 per barrel to US$96.4 per barrel, while the US Energy Information Administration increased its 2013 WTI forecast slightly to US$88.38 per barrel.